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Did you know your superannuation benefits do not necessarily form part of your estate on your passing? You would not be alone if you didn’t.

Unless you have a Binding Death Benefit Nomination (BDBN) in effect, a trustee of a superannuation fund can use their own discretion as to where to pay superannuation benefits on the death of a member.

As superannuation can form a substantial part of your personal wealth, it is important you carefully consider how any proceeds are distributed on your death. One way to ensure your superannuation benefits are paid in accordance with your intentions is to have a valid BDBN in place.

What is a BDBN? 

A BDBN is a written direction to the trustee of your superannuation fund that details your wishes as to who you want to receive your superannuation benefit in the event of your passing.

If your BDBN is valid and in effect at the date of your passing, the trustee must pay your benefit to the nominated beneficiaries.

Who can you nominate to receive your superannuation? 

You can nominate one or more of your dependants, or your legal personal representative.

Dependants include:

• your spouse (including same-sex and de facto).
• your child, your adopted child, your stepchild, a child of your spouse or your child within the meaning of the Family Law Act 1975.
• someone who is financially dependent on you.
• someone who has an interdependent relationship with you (which means a close personal relationship, they live with you, one or each of you provides the other with financial and domestic support, and personal care).

Just remember if you nominate a dependant, they need to be your dependant when you pass away.

If you nominate your legal personal representative, the benefit will be paid to your estate and distributed in accordance with your Will. Nominating your legal personal representative allows you the opportunity to gift your superannuation benefits to people who are not considered dependents (such as a parent or sibling). But this means you need to ensure your Will is in place and up to date.

What happens if you don’t have a valid BDBN?

As mentioned above, without a valid BDBN, a trustee can distribute your benefit to your legal personal representative (your estate) or a dependent of their choosing.

In some circumstances this might be less than ideal. Bearing in mind the long list of possible ‘dependents’, the trustee may distribute your benefit to a person who you never intended to benefit from your estate at all. It should be particularly borne in mind that for many people, the superannuation death benefit represents a significant (and sometimes the most significant) estate asset. Putting in place a BDBN can also be important if you intend to keep the benefits outside of your estate, which is sometimes a strategic move if there is a possibility that someone may contest your Will.

Where to from here? 

• Contact your superannuation fund to check whether or not you have a BDBN in place. If you don’t, obtain a copy of the BDBN (more often than not these forms are located on the fund’s website).
• Complete the BDBN and lodge with your superannuation fund.
• Make a calendar reminder to update in three years time (see note below).

Important things to note

1. Generally the law provides that a BDBN lapses every three years – and don’t expect a reminder from the Super Fund! Be on top of the game by planning in advance and ensuring you have a reminder system in place.
2. Speak with your accountant or financial advisor so you are aware of any tax implications of establishing a BDBN;
3. Remember to check your BDBN in the event of separation from your significant other.
4. Putting in place a BDBN is not a substitute for a whole of an estate plan and it is important to ensure you have a Will and review and update it regularly.

If you require assistance with estate planning and/or completion of a BDBN, please contact our Private Clients team who will be more than happy to assist.

This article was written by Candice Etherton, Lawyer – Property and Construction.